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Among the Two Models Constant Dividend Growth Model (CDGM) and Capital

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Essay

Among the two models Constant Dividend Growth Model (CDGM) and Capital Asset Pricing Model (CAPM), which is a better method for computation of the cost of equity?


Definitions:

Loss

A financial situation in which expenses exceed revenues, indicating negative profitability for a business or investment.

New Firms

Newly established business entities that have recently started operations, contributing to innovation, competition, and economic dynamics.

Existing Firms

Businesses that are already operating within a market, as opposed to new entrants.

Long Run

A period in economics where all factors of production and costs are variable, allowing for complete industry adjustment to changes.

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